Connect Access Card for Advanced Financial Accounting
12th Edition
ISBN: 9781260165098
Author: Christensen, Theodore E., COTTRELL, David
Publisher: McGraw-Hill Education
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Chapter 16, Problem 16.1C
Cash Distributions to Partners
Analysis
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How would you respond to each of the partners’ request?
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Bobby Donal and Bill Spader are discussing the liquidation of a partnership. Bobby maintains that all cash should be distributed to partners on the basis of their income ratios. Is he correct? Explain.
no need to explain. What is a cash priority program?
a. A guideline for the cash distributions made to partners during a liquidation
b. A list of the rules to be performed during a partnership dissolution
c. A list of the transactions that will transpire in the reorganization of a partnership
d. None of the above
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other.
To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an situation related to the partnership’s liquidation.
The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided?
The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10,000 be divided?
The building is immediately sold for $70,000 to give total cash of $110,000. The liabilities are then paid, leaving a cash balance of $80,000. This cash is to be distributed to the partners. How much of this money will each…
Chapter 16 Solutions
Connect Access Card for Advanced Financial Accounting
Ch. 16 - What are the major causes of a dissolution? What...Ch. 16 - Prob. 16.2QCh. 16 - Prob. 16.3QCh. 16 - Prob. 16.4QCh. 16 - Contrast a lump-sum liquidation with an...Ch. 16 - Prob. 16.6QCh. 16 - Prob. 16.7QCh. 16 - Prob. 16.8QCh. 16 - Prob. 16.9QCh. 16 - Prob. 16.10Q
Ch. 16 - Prob. 16.11QCh. 16 - The installment liquidation process uses a...Ch. 16 - Prob. 16.13QCh. 16 - Prob. 16.14QCh. 16 - Prob. 16.15QCh. 16 - Cash Distributions to Partners Analysis The...Ch. 16 - Prob. 16.2CCh. 16 - Prob. 16.3CCh. 16 - Sharing Losses during Liquidation Research Hiller,...Ch. 16 - Prob. 16.1.1ECh. 16 - Prob. 16.1.2ECh. 16 - Prob. 16.1.3ECh. 16 - Prob. 16.1.4ECh. 16 - Prob. 16.1.5ECh. 16 - Prob. 16.1.6ECh. 16 - Prob. 16.1.7ECh. 16 - Prob. 16.2.1ECh. 16 - Prob. 16.2.2ECh. 16 - Prob. 16.2.3ECh. 16 - Prob. 16.2.4ECh. 16 - Prob. 16.2.5ECh. 16 - Prob. 16.2.6ECh. 16 - Prob. 16.3ECh. 16 - Prob. 16.4ECh. 16 - Prob. 16.5ECh. 16 - Prob. 16.6ECh. 16 - Prob. 16.7ECh. 16 - Prob. 16.8ECh. 16 - Confirmation of Cash Distribution Plan Refer to...Ch. 16 - Prob. 16.10ECh. 16 - Prob. 16.11.1AECh. 16 - Prob. 16.11.2AECh. 16 - Prob. 16.11.3AECh. 16 - Prob. 16.11.4AECh. 16 - Prob. 16.11.5AECh. 16 - Prob. 16.11.6AECh. 16 - Prob. 16.11.7AECh. 16 - Prob. 16.11.8AECh. 16 - Prob. 16.11.9AECh. 16 - Prob. 16.11.10AECh. 16 - Prob. 16.11.11AECh. 16 - Prob. 16.12AECh. 16 - Prob. 16.13PCh. 16 - Prob. 16.14PCh. 16 - Prob. 16.15PCh. 16 - Prob. 16.16PCh. 16 - Prob. 16.17PCh. 16 - Prob. 16.18PCh. 16 - Matching Terms Match the items in the left-hand...Ch. 16 - Prob. 16.20P
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- When a partnership dissolves, the first step in the dissolution process is to ________. A. allocate the gain or loss on sale based on income sharing ratio B. pay off liabilities C. sell noncash assets D. divide the remaining cash among the partnersarrow_forwardWhich of the following statements is correct? Options: Each partner has the authority to enter into contracts which are binding upon the partnership A majority consent of all the partners is necessary when admitting a new partner The final distribution of cash to the partners in liquidation shall be made based on their profit and loss sharing agreement Admission of a new partner by purchase will change total assets and total capitalarrow_forwardAccounting In the liquidation of a partnership, a loan from a partner a. Will be paid off at the same time as payment of other liabilities of the partnership b. Will be paid off before distribution of cash to partners for their capital investments c. Will be closed to the partner's drawing account d. Will be written offarrow_forward
- The process of winding-up the business activity, converting non-cash assets into cash, paying its liabilities and distribution of cash and the remaining assets to individual partners a. Realization c. Dissolution b. Liquidation d. None of these 2. The following are the causes of partnership’s dissolution with liquidation, except – a. Bankruptcy of the firm b. When a partner die c. Mutual agreement among partners to close the business d. The purpose of which it is organized is accomplished already 3. When a partner develops a debit balance in his capital, but such partner has a loan to the partnership, he may exercise the doctrine of – a. Right of offset c. Partner’s right b. Right to seizure d. None of these 4. The first priority to be paid when there is cash available in the liquidation process, be it in lump-sum or installment type – a. Outside creditors c. Partner’s capital b. Partner’s loan d. None of these 5. If a partner is insolvent, his personal properties shall first be…arrow_forwardIn the realization process for a partnership if an asset is sold for more than book value that is recorded in the accounting records, select the statement that correctly describes this transaction. O There is no journal entry required on the partnership's accounting records O There is a loss on realization O There is a gain on realization O none of the above answers What is the process called where a partnership sells the assets, pays the creditors, and distributes the remaining cash or other assets to the partners? O rearranging O liquidation O refinancing O none of the above answersarrow_forwardChapter- Partnership 1. Explain what the problem is with being a general partner in a partnership. 2. In the last entry for a Statement of Liquidation cash is distributed to the partners. How is this done and why? 3. Henry wanted to purchase an interest in a partnership from Bertha. He paid $11,000 to her for the complete interest. The partnership capital account of Bertha showed only $4,000. Record the entry required.arrow_forward
- S1: In a partnership liquidation, if a partner's personal liabilities exceed personal assets then the partner is personally insolvent.S2: Cash Priority Program is the schedule prepared to determine the amount of payment prioritized to each partners.? A.Both statements are false B. s1 True; S2 False C. S2 True; S1 False D. Both statements are true This is a type of arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement? A. Joint entry B. Joint undertaking C. Joint operation D. Joint venture Merchandise invested by an entity under a joint operation agreement should include an entry of? A. Debit to Joint Operation under the books of the Joint Operators other than the party who invested B. Credit to Joint Operation under the books of the party investing the merchandise C. Credit to merchandise Inventory of all the Joint perators D. Credit to merchandise inventory of the Joint Operator who contributed merchandisearrow_forwardpayments to partners are made when cash becomes available. C. a partner withdraws from the business and the enterprise continues to function. d. full payment is made to all outside creditors before remaining cash is distributed to part- ners in a final lump sum payment. 40. Partner Jones, Kerr, and Lyons have decided to liquidate their partnership The partnership's statement of financial position reveals the following: Cash Other assets Liabilities 60,000 50,000 500,000 Jones, capital Kerr, capital Lyons, capital 180,000 240,000 70,000 550,000 550,000 ====== ====== The partners share profits and losses in a 4:4:2 ratio and all partners are personally solvent. Lyons received P98,000 in cash in full settlement for her share of the partnership. The selling price for the other asset is: a. P690,000 b. P640,000 C. P360,000 d. P410,000 Silverio, Domingo, Reyes, and Pastor are partners sharing earnings in the ratio of 3:4:6:8 respectively. The balances of their capital accounts on December…arrow_forwardWhen a new partner buys an existing partner's share, how is the partnership cash account affected? Question 4 options: There is no cash entry for the partnership. It is debited. It is credited.arrow_forward
- In which order are partnership assets distributed to the partners? O Capital balances, loans, profits O Loans, profits, capital balances O Profits, capital balances, loans Loans, capital balances, profitsarrow_forwardIDENTIFICATION. The process of winding up business operations which includes realization and payment of claims against partnership The conversion of noncash assets into cash. The right to apply the partner’s loan balance to the partnership against His capital deficiency. The excess of a partner’s share in partnership losses over the partner’sCapital credit balance. Another term for liquidation by total. A partner whose capital account balance is debit. A financial statement that shows the result of the liquidation process. It is transfer of capital from one partner to another. The person assigned to monitor the liquidation process. It is the termination of the life of the partnership.arrow_forward1. cash payments to partners of a partnership in liquidation are delayed until all noncash assets have been realized, any cash remaining after all partnership creditors have been paid is distributed a. In the ratio for sharing net income and losses b. According to the liquidator’s best judgment c. In amounts equal to the partners’ loan and capital account balances d. In some other manner 2. A joint arrangement in which the assets and liabilities relating to the arrangement are held in a separate vehicle can be: a. Neither joint venture nor joint operation b. Joint operation c. Joint venture d. Either joint venture or joint operationarrow_forward
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